Rail money offered to Quebec miners

Adriana Resources not the only iron ore company backed by Wuhan Iron and Steel

President and CEO of Adriana Resources, Allen Palmiere, addresses attendees of an investor forum hosted by Mining Industry NL at the Sheraton Hotel in St. John’s Tuesday. The conference event continues today. — Photo by Ashley Fitzpatrick/The Telegram

Eager to get their hands on Canadian iron ore, Chinese backers of the Lac Otelnuk project in Northern Quebec — what Adriana Resources highlights as the country’s largest iron ore deposit — are willing to cover the construction of a new rail line to move the resource to processing and shipping facilities south, in Sept-îles.

President and CEO of Adriana Resources, Allen Palmiere, included the news when he spoke about Lac Otelnuk at an investors’ forum at the Sheraton Hotel in St. John’s Tuesday. He said regardless of the solution, transportation infrastructure is needed to move iron ore from the project across the 850-kilometre span to the coast.

The company is developing plans for a mine at the Lac Otelnuk find, expected to be capable of producing 50 million tonnes of iron a year.

It hinges on having government approvals, aboriginal agreements, power and — something Palmiere focused on — rail access.

“We have some challenges,” Palmiere said. “Mining’s the least of our issues.”

Despite having talked to CN about a rail project, Adriana Resources has not signed a deal with the Canadian railway company.

“We haven’t been in dialogue with CN for many months,” Palmiere said. “The discussions are certainly not closed by any means, but we seem to have hit a bit of a stumbling block.”

At this point, he said he does not see a CN-run railway as being in the best interests of his company. He described a user-owned railway — wherein the company teams up with others mining companies active along the Quebec-Labrador border — as “problematic” as well.

On the other hand, Adriana’s China-based partner, an arm of Wuhan Iron & Steel Co. (WISCO), has put forward an offer to see through the construction of a line for specifically transporting Lac Otelnuk iron ore, he said.

WISCO is a state-owned, “major backbone enterprise,” according to its own company profile, for the People’s Republic of China — requiring iron ore for manufacturing steel for a steel-hungry nation.

“It’s not a funding issue, it’s a political issue,” Palmiere said of a WISCO-funded railway.

The comment caused a stir amongst conference-goers, though Palmiere made no direct allegation of interference by governments on the railway or overall mine development.

Meanwhile, the company is focused on moving the project forward, including negotiating benefit agreements with aboriginal groups and arranging for an estimated 730 megawatts of power required for operations. Talks have been launched with Hydro Quebec on the latter, Palmiere said.

There has been drilling on the property in the last year, but not focused on finding more iron ore so much as detailing an area for the work up of a mine plan to move things along.

The goal is to begin construction on a mine by 2014, with a view to ramping up to full production about three years from that point.

Adriana Resources has a 40 per cent ownership stake in Lac Otelnuk and will have to put up in the range of $1 billion to maintain that stake under its agreement with WISCO. Palmiere underscored the risk also being taken on by WISCO in the joint-venture Lac Otelnuk Mining.

Estimates on the project have ranged from $8-$13 billion.

Yet Lac Otelnuk is not the only Canadian iron ore project wherein WISCO is involved.

The president and CEO of Century Iron Mines, Sandy Chim, said there are a number of projects his company is pursuing in the Labrador Trough, on the Quebec-Labrador border, “and they’re all fully sponsored at the same time and supported by WISCO,” with a 25 per cent stake.

China MinMetals Corp. also has an interest in Century Iron Mines activities.

The situations are not unique. Other companies active in the Labrador Trough have roots in Asian pockets. For his part, Chim expressed no concerns over the Chinese interests.

As for the responses to overtures from companies tied to outside governments, he offered his thoughts in an Aug. 30 interview with market analyst Elizabeth Benvin for the industry publication Asian Metal.

“This is where the question is very appropriate: Why, at this point, do we have so many countries [in Asia] coming into Canada, and looking for [project] partners? Because, with (the current) market sentiment, it is hard to raise funds to develop projects in the general capital market, and although the market is not running out of funds, institutions and managers of funds are sitting on the sidelines on piles of cash in order to not take a hit with the downward sentiment,” he said.

The complete article is available for download on the Century Iron Mines website.

Anyone who has his finger on the pulse of the China's économy knows that the commodity frenzy is over. Steelstockpiles re through the roof in China. Iron ore is sitting on wharfs in Australia because Chinese costumers don't want it shipped. Forget it mate that mine ain't going to happen : see - Michael Pettis' take on the commodity situation http://tinyurl.com/8ppg7e6

If US-based Lowe's can't take over Rona, and if BHP can't buy Potash, and if CNOOC can't buy Nexen....what are the odds of now letting China be the defacto beholden entity behind new iron ore in Canada through it's financing of a new railway? Quit the investor-focused grandstanding, and get back to what you're paid to do. Give your heads a shake, you fools.